Estate Planning Advice Inspired by Prince

Prince's musical legacy to the world is irrefutable; his financial legacy is far less certain. The tragedy of losing Prince Rogers Nelson on April 21 is exacerbated by his reported lack of a will and proper estate planning.

In some ways, it's understandable that he had not taken the time to outline his wishes in the event of his death. After all, he was a young 57 years old, with no spouse or children, when he passed—and his rock star status made him seemingly immortal. Then again, Michael Jackson, another shining music star taken too soon at the age of 50, managed to create a pretty smart estate plan before he died.

Given the size of Prince's estate—reported to be somewhere around $250 million and $300 million and rising as his music sales have spiked posthumously—he should have invested a little time to dictate what will become of it all. Since he leaves behind no obvious heirs, the future of his estate is especially unclear.

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Learn from Prince's estate-planning mistakes. Some of the contributing financial experts for our Wealth Creation Channel offer the following advice:

1. Plan for your death.

"Regardless of whether you have any current heirs that you want to take care of, it still makes sense to have basic estate planning documents in place. If you die intestate (without a will), state law will dictate how your estate is distributed. If you are or become estranged from relatives, they may still be entitled to your assets. In Prince's case, this means that estranged siblings and half siblings under Minnesota law could inherit his vast fortune. Powers of attorney will allow you to designate someone who can carry out your financial and healthcare decisions if you become disabled or incapacitated."

Get more advice from Robert Altshuler, JD, CLU, CHFC.

2. Do last-minute planning if severe medical issues arise.

"Prince may have sung 'Money Don’t Matter 2 Night,' but his family and loved ones may be singing a different tune now that they're dealing with the headache of exhaustive probate proceedings. Prince's sister reportedly filed probate documents, which indicates that no will or formal estate plan was prepared. This means that Prince's estate will be subjected to the delays, costs and the public nature of probate proceedings. If he did not have a will, then he chose to let the state of Minnesota determine who his heirs will be.

Without estate planning ahead of time, Prince still could have pulled something together at the last minute. Apparently, he experienced medical issues in the weeks leading up to his death. Even if only a short time may have been available to do the work, specialized planning could have helped minimize the estate tax and establish his intended legacy—whether that might have involved charitable planning or simply to provide for family or other loved ones."

Get more advice from John M. Goralka.

3. Choose your heirs.

"Prince should have thought carefully about who will receive his music royalty rights and for how long. Copyrighting music ensures several financial rights, such as charging a station or organization for playing it to the public for profit, licensing its use by other musicians during a performance or allowing another artist to sample a portion of it. This includes all sales and sampling from iTunes, YouTube, Pandora, etc. Also, copyrights for any music produced since 1978 last for 70 years after the death of its author, and copyrights for Prince's work on the original Batman movie (anyone remember his single 'Batdance?') and any music prior to 1978 lasts 95 years after its release.

In other words, Prince's estate will be making money longer than he was actually alive. Consider that Elvis Presley's estate earned $55 million in 2015—and he died almost 40 years ago.

You might not have to worry about an extensive collection of original music beloved by so many around the world. However, if you have anything of value that you wish to pass on after you're gone, you too need to think carefully about who your heirs will be—and designate them appropriately."

Get more advice from Daniel A. Timins, Esq., CFP.

4. Talk about your plans.

"It can be uncomfortable for people to have these conversations. People generally don't like talking about their own mortality, and estate planning is an easy conversation to put off. Take Prince as an example. While we can only speculate about the reasons that he didn't have a will, at 57, his death may not have seemed imminent.

In order for individuals' wishes to come to fruition, they have to be willing to choose conversation over comfort. Talk about these issues with a qualified financial professional, along with your loved ones and beneficiaries, well in advance of when it appears timely."

Get more advice from Phil Simonides, CFP.

5. Be sure your will is accessible.

"Keep a copy of your will somewhere handy and be sure to tell your family—or at least your lawyer—where it is. All the estate planning in the world is for naught if your loved ones don't know where the documents are. In Prince's case, he was unmarried and had no surviving children, so at least in this case there are no grieving widows and orphans to worry about. But chances are that Prince intended his multi-million-dollar fortune to go, if not to a friend or friends, then to a charity. His wishes may never be carried out if his will cannot be found.

I've told my wife repeatedly where to look for the documents in the event I meet an untimely end. But I also know good and well that, if that day came, she might not be mentally able to deal with it at first. So, I keep one of the estate lawyer's business cards pinned to the bulletin board in our kitchen. Yes, it's a little morbid, but at least the number is there to call if she needs it. The estate lawyer has copies of all of our documents in the event that the originals are lost or destroyed."

Get more advice from Charles Lewis Sizemore, CFA.

6. Consider your final resting place.

"Let's be honest: This is Prince. Just like people travel to Graceland to visit Elvis' grave or make a pilgrimage to Pere Lachaise Cemetery to pay homage to Jim Morrison, fans will want to visit Prince's gravesite. They will want to leave posters and old album covers and candles and…what's that? You don't want any noise or trash accumulating around your final resting place? Okay, cremation it is.

If you want to be cremated, you better make sure you put it in writing. And (in some states) you better make sure you don't just place this desire in your will. Getting a will admitted to probate can take weeks, even months, in many states. Certain states, including California, Georgia and New York, require documents specifically naming an agent to handle the disposition of your remains, including anything from a quiet cremation and scattering your ashes to the creation of a huge mausoleum that shall be anointed with a huge fireworks display and party to last until the end of this century."

Get more advice from Daniel A. Timins, Esq., CFP.

7. Keep your beneficiary forms up to date.

"A lot of accounts actually don't depend on a will or trust to pass to your heirs. All individual retirement accounts and 401(k) accounts have beneficiary forms that take all of five minutes to fill out and actually allow you to bypass the probate process. Most brokerage accounts also have a similar form called a 'transfer on death' form. By simply filling these out, you do most of the heavy lifting of a will and avoid the legal expenses of a formal estate plan. If you are young and have relatively simple finances, this is a minimal first step you should take. However, you should eventually get around to writing a formal will with an estate attorney as well."

Get more advice from Charles Lewis Sizemore, CFA.

8. Name an executor of your estate.

"Because Prince's estate could be active until at least 2086, it is fair to say that any person serving as the executor of his will shall not be able to serve until the estate is wound up. By naming a list of executors in his will, Prince could have assured his estate would be effectively administered for a few years, maybe even a few decades. But he also would have wanted to either give his executors the ability to name successor executors or create a written mechanism that would have allowed one to be named if none is serving. For example, he could have ordered his living heirs to choose a successor executor by majority vote. He also may have named a corporate fiduciary, such as a bank or professional trust company, to act as executor (since these companies don't have to worry about dying themselves)."

Get more advice from Daniel A. Timins, Esq., CFP.

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9. Create terms of endearment.

"When you are estate planning, you may want to control both the nature and timing of your asset distribution. Some advisers call it 'control from the grave.' It's important to consider the impact of a complicated distribution strategy on loved ones. A good question to ask is: 'How will I want to be remembered by generations to come?' Only you can answer that question in the context of whatever provisions you decide to put into your estate planning."

Get more advice from Phil Simonides, CFP.

10. Establish appropriate trusts.

"Prince would have been well advised to have some of his assets, including his financial and real estate holdings, owned by a revocable trust and designate his sister or whoever he wanted as its heir. That would have bypassed the mess of going through probate and reduced his legal and tax bills. Plus, revocable trusts can be easily updated, so Prince would have been in the position to change his legacy plan as often as he would have wanted.

Also, Prince could have put his intellectual property (the music) into a charitable trust and designated his church (according to the media, he may have had an interest in leaving some of his assets to the Jehovah's Witnesses) as the beneficiary. By putting the assets in the charitable trust while he was alive, Prince would have been in a better position to figure out the value of the portfolio and plan appropriately for estate taxes. With proper planning, Prince could have helped reduce his income tax at the time of the donation and eliminated his estate tax at the time of death."

Get more advice from Chris Chen, CFP.

11. Pick a low-tax state for your trusts.

"More advanced estate planning strategies for someone with the likes of Prince's estate could involve setting up trusts in states with low or no state income tax. His estate could be subject to a tax rate of more than 50% since Minnesota has a state-level estate tax in addition to federal tax. States including Nevada, Alaska, Delaware and Wyoming allow for self-settled grantor trusts so that the individual who establishes an irrevocable trust in the state can obtain creditor protection for the assets put into the trust and still have access to the trust in certain circumstances. These trusts can be set up with a corporate trustee who would handle administrative roles and utilize an outside investment manager or agent. It is possible to obtain valuation discounts for property put into trust based on lack of marketability or liquidity, and this would lower the overall estate subject to tax."

Get more advice from Robert Altshuler, JD, CLU, CHFC.

12. Consider hiring an estate planning attorney.

"We work with our clients in a financial planning relationship; if they have estate issues, we work with their estate planning attorneys to help them implement a plan that is consistent with their whole financial picture, as well as their personal intentions.

I know Prince was very creative and very private. (On a personal note, I am saddened by his loss; Purple Rain was the first concert that I ever attended.) While he was alive, he fought his battles with the record label. He really wanted to maintain integrity and authenticity in the creative process. An estate planning attorney could have helped him carry out that level of control into the afterlife. Together, they could have worked to preserve his assets; develop charitable giving to support Jehovah's Witness and other organizations whose mission he supported; and protect his most valuable legacy, his music. (This is very challenging because how do you place a value on his extraordinary collection of music and instruments?)"

Get more advice from Marguerita M. Cheng, CFP.

13. Do it now.

"The recent passing of Prince and his lack of estate planning is a prime example of procrastination. Many of my clients avoid talking about concepts that are complicated or uncomfortable. Well, estate planning is both because it involves death, which can be a scary topic. Face your fear. Simply put, you need to find a highly recommended attorney that specializes in estate planning and schedule an initial meeting right now. After that, just go to the meeting. In most cases, it will be fairly straightforward for the estate planning attorney, and you will probably just need to tweak a few items to specify your wishes. It may sound too simple, but once you do this, you are more than half way there."

Get more advice from Robert N. Auclair, CFP.

14. Regularly review your plans.

"Many families resist making a decision or plan for fear that they may not be able to change their minds later. In reality, estate plans can and should be living documents. It pays to set a plan in motion, and then review it periodically—generally every three to five years or if there is a significant estate tax law change—in case any changes need to be made."

Get more advice from Phil Simonides, CFP.